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Economics Politics & government Society

[2989] Eroding our commons will erode our togetherness

The Malaysian government faces tight fiscal space and the runway to keep going on as we do now is not too long or wide.

The population is still young but it will not be so much longer. This suggests growing needs for healthcare services. In the meantime, education is somewhat underfunded judging by less-than-favorable learning outcomes, compounded or caused by pandemic disruption. Defense is underfunded at a time when the world is becoming a more dangerous place; previous wasteful spending on this front does not help. Climate change requires new kinds of public infrastructure investment. Petroleum revenue is highly like to go down permanently due to rising provincialism, while an aging society means income and consumption tax revenue will struggle to rise in the next 10-20 year period. This has yet to take into account pension liability that the government faces in the same period, which is also underfunded. And, a lot of Malaysians do not have enough savings and in their old age, they will depend on public services more.

The list goes on and on to tell us that under business-as-usual, public spending requirement is rising while there is every reason to suspect that the pace of government revenue growth will not match the former.

The current government understands this and there are efforts to move away from the current business-as-usual scenario. Diesel subsidies has been partly removed (but not in Sabah and Sarawak). There are plans to abolish or at least lower petrol subsidies but that has not happened yet. Recently, the Health Ministry announced it would expand its full-paying patient scheme.[1] This is largely in line with a high-level suggestion made last year that public healthcare should be more targeted to relief fiscal pressures caused by the public health services.

And even more recently, the Prime Minister said education subsidies enjoyed by the rich is to be cut.[2] It is unclear what the actual policy is but that is for us to find out soon when the government tables its 2025 Budget later this month.

But as the government seeks to improve its fiscal conditions, it is crucial to remind Putrajaya that not all fiscal consolidation actions are of equal measures. While fiscal pressures are important and must be addressed urgently, it is not the only things that matter to this country. When it comes to cut or rationalization of public service, it is good to take a step back and reassess what we would lose in return for what we would gain not just in the short Parliament terms, but also in the long-term. After all, most of us save the unfortunate ones, live beyond the 5-year parliament term.

What we would lose from reduced access to public education and health services (and other similar services provided by the government) is the commons. It is the space where we Malaysians theoretically—really, actually for many people—come together regardless of our origins in terms of geography, class, gender, ethnicity, etc. That togetherness allows for the creation of shared lived experience or even shared identity. In an age where technology and quirks of history are leading us to live in our little bubbles, it is our public service that attempts to connect these bubbles into a larger common.

Without these commons, we Malaysians will lose connection to each other, losing whatever left of our shared values and shared identity. Erosion of these commons necessarily lead to the erosion of our togetherness.

I do not think these commons should be eroded by concerns over fiscal pressures, especially when these pressures could be alleviated through other more effective means. Instead of applying the knives to public education and public healthcare systems, other policies could be jettisoned first, like outdated incentives and reliefs provided to private healthcare service providers or private insurance, or outdated subsidies for electric vehicles. And of course, cutting petrol subsidies would go a long way too (although with crude oil prices are low these days, one wonders how long it would go).

And really, Malaysians are able to pay much more taxes. But we refuse to do so.

Our refusal points to another problem: our reluctance to make short-term sacrifices to ensure larger long-term gains and sustainability. It seems that we rather avoid the short-term pain and instead lose something valuable in the future.

Hafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reserved

[1] — Health Minister Dzulkefly Ahmad is standing by the government’s proposal to expand private wings at public hospitals as part of a hybrid model termed “Rakan KKM” (Health Ministry Friends). [Health minister defends private wings at public hospitals plan. Malaysiakini. September 24 2024]

[2] — Menjelang pembentangan Belanjawan 2025 tidak lama lagi, Anwar Ibrahim menghantar ‘isyarat’ yang menunjukkan kerajaan sedang meneliti pengagihan subsidi pendidikan kepada rakyat negara ini. Berucap di Putrajaya hari ini, perdana menteri berkata, kerajaan mahu memastikan subsidi sebegitu disalurkan kepada golongan yang benar-benar layak saja.[Golongan kaya mungkin tak lagi dapat subsidi pendidikan. Malaysiakini. Accessed March 31 2024]

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Economics

[2988] Malaysia’s 2024 sweet spot for growth

After years of economic disruptions and wild growth swings, the Malaysian economy is now in a sweet spot. Strong GDP expansion rates in the past two quarters show us as much: 4.2% year-over-year in the first quarter and then 5.9% yoy in next. Lest somebody points to base effect playing a role (indeed the large variability is still a problem), adjusted quarter-over-quarter numbers are robust as well: 1.5% qoq during first and then 2.9% qoq in the second quarter. These qoq figures are respectable because the post-Covid-19 2021-2024 median qoq rate so far is 1.4%-1.5%.

The government is quick to claim credit. To some extent, it is deserving. The Malaysian government of all colors (2018-2020 PH, 2020-2021 PN-BN, 2021-2022 BN-PN and the current PH-BN-GPS) has been trying to capitalize on fraying global supply chain. Malaysia understood of the need to move quickly as early as 2019 (or possibly earlier). But political crisis (coupled with a health and economic crises) led to policy paralysis and that crisis only ended in 2022 with PH returning to power with unlikely partners. The stability plays an important role in sharpening the minds beyond domestic partisan survival, which allows us to pursue new tech investment opportunities and boost Malaysia’s role in the global manufacturing and technological services (it is not without concerns, especially with the influx of data centers which create little jobs and consume tremendous amount of water and electricity which could push out other manufacturing industries that are not necessarily low-tech).

But in some other ways, it is also about the stars aligning involving sectoral syncing and growth normalization. To understand this, we need to go back to 2020 when many parts of the world hunkered and locked down in response to the pandemic. Yes, the pandemic remains relevant four years after it spread.

The year 2020 was the ground zero, which everything in free fall. By 2021, the pandemic was still a concern but things were improving. Yet many could not move around freely. Services—a labor-intensive sector—had a weak growth and an incomplete recovery. In contrast, the goods sector experienced a surge and production surpassed pre-pandemic levels: XBox, IPhone and a whole lot of electronics were bought and sold to keep everybody sane at home. Afterwards when the economy opened up in 2022 with all the tangible stuff that could be bought were bought (notwithstanding orders unfulfilled due to the then supply chain disruption which kept the goods sector going), goods demand growth took a break in return for heightened services: tourism, restaurants and other related sectors boomed. That is more or less the story for Malaysia, as can be seen from the goods-services growth chart below:

Some rights reserved. Hafiz Noor Shams

The Malaysian cycle for goods and services almost synchronized at the top in 2022, which in return led to the synchronized whiplash a year later. From 8.9% growth in 2022 thanks to complete reopening of the economy, 2023 GDP rose by only 3.6%. The 2023 goods market was so bad and that was reflected in Malaysian industrial production and export figures. Only the almost complete tourism recovery helped the overall 2023 economy from doing worse.

What makes 2024 a sweet spot is that it is likely a proper normalization amid further synchronization. Normalization because the gyration of growth since 2020 is finally stabilizing for both sectors. Additionally, that normalization and stabilization are bringing balanced growth since both goods and services are expanding faster at the same time (so far).

Normalization, synchronization and balanced expansion. The government under Anwar Ibrahim has done well in adapting to changing global environment and lucky at the same time. Not only has growth been firm. Global prices have been kind to Malaysia as well, leaving inflation benign. Job creations are going well. In short, economic conditions are good. I would argue this leaves the government with a lot of leeway to commit to reforms.

The question now is if the great conditions brought by the cycles would persist. There is some hope (and bad news too) for that but we cannot run on hope that much this time around. With cyclical normalization from here on and definitely in 2025, the government would have to depend less on luck and more on its own initiatives.

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Books & printed materials Pop culture Society

[2987] Outsiders, disruptions and mainstreaming

The central theme of Michiko Kakutani’s The Great Wave is simple. It is written on the cover: outsiders drive innovation and they have been the cause of various disruptions in human history. It is not a groundbreaking argument to make.

The unremarkable observation would have made the book an uninteresting read for me, except she manages to pull me back in with her comment on arts and culture, an area where she is clearly an authority. Kakutani formerly worked as a book critic at the New York Times.

She tells how those living on the margin of US society—blacks especially but also immigrant communities generally—were cultural innovators who eventually dictated mainstream tastes in music, movies, literature and comedy. They were innovators because they were less bounded by orthodoxy of the (white) majority and that the dual nature of their identity (that as a member of a minority community and as an American) allowed them to reach out to multiple sources for inspiration.

Kukatani cites a long list of authors and artists to show just how prevalent the outsider-turned-insider phenomenon is in the US. The list feels like a long must read recommendation that reminds me of another book of hers, Ex Libris, which is a list of 100 or so modern-time books that she believes worth reading.

While going through that cultural section of The Great Wave, my mind wanders to another book I read earlier this year. Chuck Klosterman’s The Nineties also has the outsider-insider theme, although it appears more implicitly within the context of the 1990s. Klosterman’s discussion is specific to the the evolution of the rock genre, which began as the favored noise among youth with marginal taste in music (in the 1950s if I recall correctly) and then turned into billion-dollar megabusiness that Kurt Cobain’s Nirvana rebelled against.

So, I find The Great Wave interesting in the sense that it is a companion to The Nineties. Kakutani provides a generalized theory that explains Klosterman’s specific cases.

Categories
Books & printed materials Politics & government Pop culture Society

[2986] Maybe it was Klosterman’s The Nineties

Klosterman’s generation may believe in something or they may not. But they more likely to believe in it, if not by too much.

That something could be almost anything and that is the attitude taken throughout The Nineties, a 2022 book written by Chuck Klosterman. That is not to say he takes no position on an issue. He does and I feel he understands the 1990s (from Gen X perspective) exactly through this prism: a prism that suggests disagreements during the decade (in the US) was never too big to matter by too much. This idea is repeated several times throughout the book but the point achieves clarity at the very end when he discusses the competition between George Bush and Al Gore during the 2000 US Presidential election.

Klosterman argues that in the run up to the election, both candidates were really standing on the same policy platform and that made it impossible for many voters to decide who should be voted in based on substantive matters. So difficult it was that Klosterman highlights that voters were deciding who to decide based on whom they prefer to have a beer with. The answer is Bush, who was more affable and less aloof than Al Gore. So similar were the two that a third candidate—Ralph Nader—became the credible second candidate, as Bush and Gore merged into one candidate in the mainstream consciousness.

Of course, things changed after the election and definitely after the 9/11 attacks. And that was really the last time politics were taken so unseriously by US voters, or so Klosterman argues. Differences since began to become so big that that kind of ambivalence during the 1990s could not exist anymore.

But the book is not primarily about politics. The Nineties mostly tries to capture the mood of the decade and that means multiple references to hit songs and major movies. While I regularly refer to Wikipedia or YouTube to immerse myself into a book, this the first time I went through Spotify to listen to songs while reading. Nirvana’s Smell Like a Teen Spirit gets an early mention as the author explains how the band from Seattle changed everything we understood about rock music. Yes, Nirvana is more grunge than rock, but Klosterman rationalizes songs such as In Bloom evolved as a rebellion against the overcommercialization of rock, which itself was pioneered by unruly teenagers in the 1950s. When rock stars of the 1990s wanted fame and wealth, Nirvana (and Kurt Cobain especially) represented a new breed of artists who despise those. It was uncool to be famous and wealthy. Feeling so guilty of his success, Cobain took a gun and shot himself in the head. There are several other songs that Klosterman goes in detail. Alanis Morissettte’s You Oughta Know. Tupac Shakur’s is another. Each has an outsized influence on the 1990s US.

Reiterating the ambivalence of the 1990s, Klosterman discusses Seinfeld in a segment of the book. It is a comedy sitcom famously about nothing. What follows is a discussion on television programming, on how many sitcoms received high ratings only because they were aired in certain prime slots and that those slots were in high demand because many viewers were too lazy to switch channels after watching something earlier. People were watching only because, to paraphrase Klosterman who in turn quoting George Costanza, “because it’s on TV”, in reply to the question why would anybody watch it. Not because it was good or anything else.

But not all fell into that logic. Some drove the market and were ‘Must See TV’. Friends did that. Here, Klosterman describes Friends in the ambivalent contradictory way: “None of the characters were supposed to be cool, so the audience didn’t need to be cool in order to understand why they were appealing.” And there is Frasier, described as “a white-collar show openly obsessed with intellectual sophistication. Characters casually joked about Jungian philosophy, Sergei Rachmaninov and Alfred, Lord Tennyson… But its dynastic grip on critics and Emmy voters galvanized a paradox: Frasier was seen as brilliant television because it focused on characters who would never watch television.”

Again, later on the author’s commentary on the Star Wars prequel that came out in 1999: “Movie critics disliked The Phantom Menace, but diehards hated it more… Lucas tried pretty goddamn hard to satisfy an entire generation of strangers who likely wouldn’t have been satisfied by anything he delivered. Did such a mean-spirited categorization bother him? Maybe. But not really.”

You get the drift.

I find the yes-no-maybe noncommittal construction as slightly offputting. Yet, beyond the noncommittal statements are brilliant assessment of the 1990s. Maybe, the decade was that complex that it is difficult to be sure what was really going on, unlike the decades after that seem to be governed more by black-or-white logic; either you’re with us or against us even in the face of ever more complex world.

Maybe, the possible lesson here is that in order to solve our contemporary divisions, we just need to be less sure of ourselves.

Categories
Economics

[2985] Malaysia’s EV policy risks running obsolete

The government has been incentivizing electric vehicle purchases and use as a way to boost domestic electrification trend. Those incentives come in the form of zero import duty, zero excise duty, zero road tax and non-tax on EV and/or related equipment, among others.

Whatever the early rationale behind these incentives,[1] changing global conditions are making these policies dated. Rising trade barriers across the world are affecting EVs adversely, especially those made in China. Regardless of the appropriateness of US and more relevantly European policy in response to China’s dominance in the space, these barriers would redirect Chinese EV volume from places with high tariffs to other economies without similar restrictions. These other economies—many of them are small-to-medium sized (like Malaysia)—might be the ones having to absorb oversupply. In other words, there is an EV oversupply coming our way.

Under a scenario where there are downward pressures on EV prices, would Malaysia’s set of incentives still make sense? I would argue no, especially for the retail side of the equation.

There are several reasons for the negative answer.

First, the downward pressures on prices caused by manufacturers’ need to reduce their inventories would likely be good enough to encourage domestic electrification on the road.

Second, the prospects of higher petrol prices caused subsidy rationalization exercise should already be a big incentive enough for road users to migrate from internal combustion engine to EV. This is of course depending on the government going through with the rationalization exercise.

Third, the coming oversupply would be an opportunity for the Malaysian government to shift the burden of encouraging EV from the public towards private manufacturers. After all, these are private EVs we are talking about, not public transport. And even better, the burden would be shifted towards foreign manufacturers, which many of these manufacturers originating from China.

Fourth, the government faces fiscal pressures and the migration towards EV would be a chance for Putrajaya to reap the migration dividend in the form of more duty and levy revenue. This does not mean raising those duties and levies to punitive level. It could mean just normalizing it (i.e. undo the incentives). That additional revenue could be used to either finance electrification facilities, or other pressing needs in education, health or even defense… or finance public transport projects instead of boost private vehicle ownership.

If it were up to me, I would quickly cut short these incentives. Immediate reversal of policy is likely too disruptive to be good and that suggests undoing it by end of 2024 sounds reasonable.

Otherwise, these EV incentives do have sunset clauses. I would recommend letting them lapse. But waiting until 2025 might be too long for Malaysia to benefit for changing global landscape.

Hafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reserved

[1] — Given early (still?) focus on luxury electric vehicles and the government being overly focused on retail side of EV supply chain, the policy might have been captured by what I would call hobbyist lobbyists, i.e. rich men who take electric vehicle as a symbol of prestige.

It definitely didn’t help with the perception when early major lobbyist was an association named Malaysian Electric Vehicle Owners Club.

If the policy had not been captured, it would have focused early on the mass market, allowed leeway for cheap but reliable Chinese brands instead of the likes of Tesla, and also would provide better stress on industrial rather than retail.